Understanding Marketing Environment and Strategies for Competitive Advantage

1. May 18, 2016 Business Ethics In Marketing

2. Objectives • Identify the five components of the marketing environment. • Explain the types of competition marketers face and the steps necessary for developing a competitive strategy. • Describe how marketing activities are regulated and how marketers can influence the political-legal environment. • Outline the economic factors that affect marketing decisions and consumer buying power.

3. Objectives • Identify the five components of the marketing environment. • Explain the types of competition marketers face and the steps necessary for developing a competitive strategy. • Describe how marketing activities are regulated and how marketers can influence the political-legal environment. • Outline the economic factors that affect marketing decisions and consumer buying power.

4. Environmental Scanning • Collecting external marketing environment information to identify and interpret potential trends • Trends represent significant opportunities or threats to the company • Example: Consumer Product Safety Commission issued a recall of American Girl Craft Pearly Beads & Ribbon Bracelets kits, citing high levels of lead in some of the beads

5. Environmental Management • Attainment of organizational objectives by predicting and influencing the competitive, political-legal, economic, technological, and social- cultural environments • Strategic alliance - Partnership in which two or more companies combine resources and capital to create competitive advantages in a new market

6. The Competitive Environment • Interactive process that occurs in the marketplace among: • Marketers of directly competitive products • Marketers of products that can be substituted for one another • Marketers competing for the consumer’s purchasing power

7. The Competitive Environment • Marketing decisions by individual firms influence: • Consumer responses in the marketplace • Marketing strategies of competitors • Few organizations have monopoly positions • Monopoly - Market structure in which a single seller dominates trade in a good or service for which buyers can find no close substitutes

8. The Competitive Environment • Antitrust laws - Designed to prevent restraints on trade such as business monopolies • Oligopoly - Few number of sellers in an industry with high start-up costs which keep out new competitors

9. Types of Competition • Direct • Among marketers of similar products • Example: Alternative suppliers in the cell phone market such as Verizon and AT&T • Indirect • Involves products that are easily substituted • Example: In the fast-food industry, pizza competes with chicken, hamburgers, and tacos

10. Types of Competition • Competition among all firms that compete for consumers’ purchases • All firms compete for a limited number of dollars that consumers can or will spend • Example: The purchase of a Honda Accord might compete with a Norwegian Cruise Line cruise

11. Developing a Competitive Strategy • Competitive strategy - Methods through which a firm deals with its competitive environment • Should we compete? • Depends on firm’s resources, objectives, and expected profit potential • In what markets should we compete? • Requires marketers to acknowledge their firm’s limited resources

12. Developing a Competitive Strategy • How should we compete? • Requires marketers to make product, distribution, promotion, and pricing decisions that give the firm a competitive advantage • Time-based competition - Strategy of developing and distributing goods more quickly than competitors

13. The Political-Legal Environment • Consists of laws and their interpretations that require firms to operate under competitive conditions and to protect consumer rights • All marketers should be aware of the major regulations that affect their activities

14. Government Regulation • Falls into four historical phases: • Antimonopoly period of the late 19th and early 20th centuries • Protecting competitors during the Great Depression of the 1930s • The third phase focused on consumer protection • Industry deregulation began in the late 1970s and continues to the present

15. Government Regulation • Newest regulatory frontier is cyberspace • Federal and state regulators are investigating ways to police the Internet and online services • Privacy and child protection issues are difficult enforcement challenge

16. Government Regulatory Agencies • The Federal Trade Commission (FTC) has the broadest regulatory powers over marketing • Enforces laws regulating unfair business practices and stops false and deceptive advertising 

17. Government Regulatory Agencies • Other federal regulatory agencies are: • Consumer Product Safety Commission • Federal Power Commission • Environmental Protection Agency • Food and Drug Administration • National Highway Traffic Safety Administration • To enforce laws, The FTC uses • Consent order • Cease-and-desist orders

18. Other Regulatory Forces • Consumer interest groups and self-regulatory organizations • Other groups attempt to advance the rights of minorities, senior citizens, and other causes • Self-regulatory groups represent industries’ attempts to set guidelines for responsible business conduct

19. The Economic Environment • Gross domestic product (GDP) - Sum of all goods and services produced by a nation in a year • Economic environment - Factors that influence consumer buying power and marketing strategies • Business cycle - Pattern of stages in the level of economic activity

20. Stages in the Business cycle • Prosperity (Expansion) - Consumer spending is brisk; growth in services sector • Recession - Consumers focus on basic, functional products • Depression - Consumer spending sinks to its lowest level • Recovery - Consumer purchasing power increases

21. The Global Economic Crisis • Business cycles take a severe turn and affect consumers and businesses across the globe • Marketers must reevaluate their strategies and concentrate on their most promising products

22. Inflation and Deflation • Inflation devalues money by reducing the products it can buy through persistent price increases • Deflation can cause: • A freefall in business profits • Lower returns on most investments • Widespread job layoffs

23. Inflation and Deflation • Unemployment - Proportion of people in the economy actively seeking work but do not have jobs • Rises during recession and declines during recovery and prosperity • Income - Influences consumer buying power • Marketers focus on discretionary income, the amount of money people have to spend after buying necessities

24. Resource Availability • Resources are not unlimited • Shortages result from several conditions, including political instability and lack of raw materials, component parts, or labor • Demarketing - Reducing consumer demand for a good or service to a level that the firm can supply

25. The International Economic Environment • Marketers must monitor the economic environment of other nations • Politics in other countries affects the international economic environment as well

26. The Technological Environment • Represents application of knowledge based on discoveries in science, inventions, and innovations to marketing • Technology leads to: • New products • Improvements in existing products • Better customer service • Reduced prices

27. The Technological Environment • Technology addresses social concerns • Sources of technology: • Industry • Educational institutions • Not-for-profit institutions • Federal government

28. Applying Technology • Marketers monitor new technology to gain a competitive edge and to enhance customer service • VoIP (voice over Internet protocol) - A phone connection through a personal computer with any type of broadband Internet connection • Internet Protocol Multimedia Subsystem (IMS) will offer new opportunities to marketers

29. The Social-Cultural Environment • The relationship between the marketer, society, and culture • Marketers must be sensitive to demographic shifts and changing values • Increasing importance of cultural diversity • Example: Univision and Telemundo face growing competition in Spanish-language television programming

30. Consumerism • Social force within the environment • Aids and protects the consumer • Exerts legal, moral, and economic pressures on business and government

31. Consumerism • Consumer rights: • The right to choose freely • The right to be informed • The right to be heard • The right to be safe

32. Ethical Issues in Marketing • Marketing ethics - Marketers’ standards of conduct and moral values • Some industries are required by law to maintain corporate-level positions responsible for ethics and legal compliance • Workplace may generate serious conflicts when individuals discover that their ethical beliefs don’t match those of their employer

33. Ethics in Marketing Research • Consumers are concerned about privacy • Proliferation of databases • Selling of address lists • Ease with which consumer information can be gathered • Several agencies offer assistance • The U.S. government maintains a Do Not Call registry to prevent unwanted telemarketing

34. Ethics in Product Strategy • Product quality, planned obsolescence, brand similarity, and packaging raise ethical issues • Example: Packaging strategy • Larger packages are more noticeable on the shelf • Oddly sized packages make price comparison difficult • Bottles with concave bottoms appear to have more liquid in them than they do

35. Ethics in Distribution • What is the appropriate degree of control over the distribution channel? • Should a company distribute its products in marginally profitable outlets that have no alternative source of supply?

36. Ethics in Promotion • Truth in advertising is the bedrock of ethics in promotion • Marketing to children has come under increased scrutiny • Promoting specific products to college students can raise ethical questions

37. Ethics in Pricing • Most regulated aspect of a firm’s marketing activities • Example: Credit-card companies target consumers with poor credit ratings • Offer them what industry observers call “subprime” or “fee-harvesting” credit cards

38. Social Responsibility in Marketing • Marketing philosophies, policies, procedures, and actions that have the enhancement of society’s welfare as a primary objective • Four dimensions of social responsibility: • Economic • Legal • Ethical • Philanthropic

39. Marketing’s Responsibilities • Corporate responsibility covers the entire framework of society • Marketers must consider: • The global effects of their decisions • The long-term effects of their decisions • The well-being of future generations • Entire communities can benefit through socially responsible investing

40. Marketing and Ecology • Ecology - The relationship between organisms and their natural environments • Environmental issues influence all areas of marketing decision making • Green marketing - Production, promotion, and reclamation of environmentally sensitive products

41. Strategic Implications of Marketing in the 21st Century • With the Internet and rapid changes in technology, competition is even more intense than before • Marketers face new regulations as the political and legal environment responds to changes in the United States and abroad • Ethics and social responsibility must underlie everything that marketers do in the 21st century

42. Zappos Video http://www.cengage.com/marketing/book_content/boone_9781133628460/videos/ch03.html